Indian Overseas Bank (IOB), headquartered in Chennai, recently commemorated its 89th Foundation Day. It was registered as a joint stock bank on November 20, 1936, in Madras. In 1937, M.Ct.M. Chidambaram Chettyar founded the bank to promote overseas banking and facilitate foreign exchange operations. It initially catered to the Nattukottai Chettiars, a mercantile community that had migrated from Chettinad to Ceylon (Sri Lanka), Burma (Myanmar), Malaya, Singapore, Java, Sumatra, and Saigon (Ho Chi Minh City).
Chettyar had served as the chairman of the bank since its founding until 1954. According to information from the bank, Chettyar was a member of the Council of State in Delhi. In addition to his role in advancing banking, he was involved in the insurance sector. He served as the chairman of United India Life Assurance Co. Ltd. and held directorial positions in several other prominent Indian companies.
The other key figures who played a vital role in the bank’s early growth were K.V.Al. Rm. Alagappa Chettiar, the deputy chairman. A Barrister-at-Law, he was a prominent banker and businessman in South India. He went on to establish Alagappa University at Karaikudi. H. Bhimasena Rau, the retired Accountant-General of the Government of India, and Chunilal B. Mehta, a well-known cotton and bullion merchant of Bombay, were also instrumental in driving up the bank’s business in its initial days. Two well-known businessmen with investment in Malaya — P.K.N.K.M. Nagappa Chettiar and P.V. Raman Chettiar — also played a key role.
From rented building
IOB opened its registered office on February 10, 1937, in a rented building on First Line Beach in Madras. After a few months, it was shifted to United India Building, where United India Insurance Co. was operating. The Madras branch began operations on February 10, 1937, and was located in the Esplanade. In the same year, branches were established in Rangoon (now Yangon) in Burma and in Karaikudi. In the 1930s, nearly half the population of Burma consisted of ethnic Indians. And Chettiars from Tamil Nadu were in large numbers, engaged in money-lending and trading. The bank’s second overseas branch was established in Kuala Lumpur in 1938, followed by a branch in Ipoh, Malaysia, in the same year. IOB inaugurated a branch in Singapore on February 12, 1941.
The bank’s authorised capital was ₹50 lakh, consisting of 50,000 shares of ₹100 each. The paid-up capital in the first year was ₹12.50 lakh, consisting of 25,000 shares of which ₹50 per share was called up. By June 1941, ₹30 per share was called up, and the paid-up capital rose to ₹20 lakh. In September that year, the paid-up capital was increased to ₹50 lakh with 25,000 shares of ₹100 each issued at a premium of ₹20 per share and only ₹10 per share called up. The initial subscribers to the capital were K. Srinivasan and K. Gopalan, the brothers and proprietors of The Hindu. S. Krishnaswamy, a retired professor of Madras University, was also one of the prominent shareholders. The net profit earned by the bank from its inception on February 10, 1937 to December 31, 1938 was ₹1,454 annas 8 and pies 8.
Problem in Burma
One unexpected development the bank had to face was the change in the political system in Burma. In 1963, the Burmese government nationalised the banks. The assets and liabilities of IOB’s Rangoon branch were taken over by Peoples’ Bank No.8.
Over the years, IOB has taken over eight smaller banks in Tamil Nadu. In the 1960s, many smaller banks in the southern States ran into difficulties, with several going into liquidation. Numerous mergers occurred, some voluntarily and some mandated by the regulator. In 2007, it took over one of the banks it had promoted with other private sector banks. For instance, the Coimbatore Varthak Vridhi Bank Ltd. was first merged with Srinivasa Perumal Bank Ltd. in 1964, and the merged entity was then merged with IOB in 1966. The other banks that merged with IOB include South Indian Bank Ltd. (in 1990), Tiruppur Lakshmi Vilas Bank Ltd. (in 1966), Coimbatore Aryan Bank Ltd., Coimbatore Standard Bank Ltd., Kulithalai Bank Ltd., Nanjinad Bank Ltd., Bharat Overseas Bank, and Suvarna Sahakari Bank.
The bank has been at the forefront of technological innovation that started with the establishment of the Information Technology Department in 1985, known as the Computer Policy and Planning Department. IOB was among the first public sector banks to achieve 100% branch computerisation by March 31, 2003. It also implemented a data warehouse by 1999.
Partial privatisation
When IOB was in the private sector from 1937 to July 1969, its shares were listed in the Madras Stock Exchange. Its capital was ₹1 crore as on March 1969. From 1969, the Government of India was the sole owner and hence the shares were not quoted until the process of partial privatisation was initiated during 2000. In 2000, as the Government of India started partial privatisation, the bank was permitted to access the capital markets for raising capital.
The first-ever public offer of the bank opened on September 25, 2000. The Government of India, being the sole owner of the bank, was offering 11,12,00,000 shares at the face value of ₹10 per share. The aim was to unlock the value to the tune of ₹111.20 crore and to encourage the culture of equity through sharing of national assets in the form of shares. The issue closed on September 29. It was oversubscribed 1.87 times in spite of unfavourable market conditions. The staff quota was oversubscribed 1.72 times. After this public offer, the government’s stake stood at 75%. The shares were listed on the Chennai, Bombay, and National Stock Exchanges. The allotment was made in October 2000.
As of December 31, 2024, IOB had 3,322 branches and a customer base of 4 crore, with 21,147 employees. The bank is planning to establish four new regional offices this fiscal, with three already added. Around 100 new branches are anticipated by 2025-26. IOB remains focused on improving its performance and reducing non-performing assets, reinforcing its commitment to sustainable growth and customer satisfaction.
Published – February 23, 2025 11:01 pm IST